International markets, in today’s inter-connected world, play an increasingly important role in shaping domestic economic policy. In Latin America, the impact of economic globalization is especially apparent.
But while Latin America scholars have long assumed connections between international political economy and domestic politics, they have only now begun to rigorously explore the linkage. Maria Victoria Murillo’s superb new book, Political Competition, Partisanship, and Policy Making in Latin American Public Utilities, is a welcome contribution to the developing literature on the subject.
Murillo, an associate professor at Columbia University’s School of International and Public Affairs, examines the impact of partisanship and political competition, and she provides novel explanations behind reforms in the electricity and telecommunications sectors. Her work also offers broader insight into the overall formulation of public policy.
Globalization, with all its incentives and sanctions, is often seen as encouraging countries to undertake market-oriented reforms, with Latin America’s neoliberal reforms being a case in point. The capital intensiveness and technological complexity of the electricity and telecommunications sectors should further increase the possibility that intertwined markets and U.S.-trained technocrats would help to usher in market-oriented reforms. However, Murillo documents a substantial variation in both the timing and content of reforms to Latin America’s public utilities.
The powerful impact of globalization is seen in the fact that pragmatic populist converts were as likely to initiate liberalizing reforms as right-leaning, true believers in the “free market.” But this does not mean that partisan orientation is irrelevant. Murillo finds that, throughout Latin America, credible political competition from left-leaning political parties reduced the chance that privatization would be initiated in the electricity and telecommunications sectors by at least 75 percent. It diminished the likelihood of establishing regulatory agencies by 70 percent.
Partisanship also shaped the content of reforms. Right-leaning reformers initiated “market-conforming” policies that reduced the regulations for businesses to enter the market, established few obligations for market participants and encouraged weak regulators. At the same time, populist reformers—who pragmatically converted to liberalization in light of international and domestic economic incentives—implemented “market controlling” reforms, including foreign capital restrictions, obligations for new investors and the establishment of independent regulators.
Beyond her econometric study of the timing of reforms, Murillo uses detailed case studies of Argentina, Chile and Mexico to analyze post-reform politics. In particular, the book examines how institutional legacies, policy responses and feedback continue to shape reforms. Interviews with key policymakers and an analysis of local press reports make these case studies especially convincing.
The key issue of post-privatization politics is the design of regulatory institutions and the distribution of costs and benefits among providers, sectoral rivals and consumers. When a sector received high public attention, usually in connection with a crisis, Murillo finds that electoral competition motivated policymakers to redistribute in favor of consumers. This occurred most frequently in the electricity sector because providers had fewer competitors and serviced a greater share of the public.
When sectors do not have a high profile or there is little electoral competition, regulatory outcomes were determined by the interests of private providers in interaction with the preferences of political leaders. Domination of the market by powerful providers was more likely when an industry is concentrated and the original reformers remained in power.
Murillo’s study is essential reading for those interested in the politics of public utility regulation. However, it also provides valuable insights about the policy consequences of partisan competition in Latin American democracies. It is a groundbreaking examination of the causal mechanisms connecting globalization with domestic policy reform.